New requirements for R&D tax relief claims
We outline new requirements for claiming research and development (R&D) tax reliefs, introduced this year.
Companies intending to claim R&D tax reliefs, under both the research and development expenditure credit (RDEC) and SME schemes, need to be aware that new requirements are being introduced this year.
For accounting periods starting on or after 1 April 2023, some companies will need to notify HMRC that they will be making a claim for R&D tax relief in advance of making the claim. The ‘claim notification’ must be submitted via an online form no later than six months after the end of the period of account.
HMRC’s guidance notes that the claim notification will be required where:
- The company is claiming for the first time.
- The company has claimed for the previous tax year, but that claim was not submitted until after the last date of the claim notification period (which ends six months after the last period of account).
- The company’s last claim was made more than three years before the last date of the claim notification period.
The guidance also sets out the submission deadline (including some illustrative examples), who can submit the claim notification, and the information required to complete the form. The claim notification form can be accessed from the guidance.
From 1 August 2023 [now amended to 8 August 2023], all companies will be required to submit additional information about R&D tax relief claims, before the Corporation Tax returns (containing the claims) are submitted. HMRC will remove R&D relief claims from returns if this additional information has not been submitted in advance.
Companies will need to review HMRC’s guidance on the additional information required, in detail, to ensure that they meet the requirements. The guidance also explains who can submit the additional information form (accessed from the guidance page) and other information that will be required (for example, contact details for the main R&D contact in the company and any agent involved in the claim).
Other recent developments on R&D tax relief
Consultation on a single scheme for R&D tax relief
In January 2023, HMRC and HM Treasury published a consultation setting out proposals for a single scheme for R&D tax relief, to replace the current two schemes. ICAS responded, supporting the aim of introducing a simplified, single relief based on the RDEC scheme. We also commented on various options for the design of the scheme.
The government announced in the Budget that draft legislation on a merged scheme would be published for technical consultation in summer 2023, with a summary of responses to the consultation. A final decision on whether to merge the RDEC and SME schemes would be announced at a future fiscal event.
Budget announcement – additional tax relief for R&D intensive SMEs
For expenditure on or after 1 April 2023, the RDEC rate increased from 13% to 20%, the SME additional deduction reduced from 130% to 86%, and the SME payable credit rate decreased from 14.5% to 10%. However, in the March Budget, the Chancellor announced that additional R&D tax relief would be provided for eligible R&D intensive SMEs.
A new credit rate will be available to loss-making companies whose R&D expenditure constitutes at least 40% of total expenditure. Qualifying companies will be able to claim a payable credit rate of 14.5% for qualifying R&D expenditure, instead of the 10% credit rate for companies claiming under the existing SME scheme. The change takes effect from 1 April 2023, with eligible companies able to claim once legislation is in place. Draft legislation is expected to be published for technical consultation in summer 2023 – to be enacted in the next Finance Bill.
Let us know your views
ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by members. We welcome input from members to inform our work; email firstname.lastname@example.org to share your insights and feedback.